Powder pops. WPC 80 slips. Dairy proteins defy gravity.

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Powder pops. WPC 80 slips. Dairy proteins defy gravity.

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Nonfat rallied nearly 30 cents in about 15 days. Can that rally can hold? WPC80 is showing its first real signs of softness in a while. Is it a seasonal slowdown or a sign? And milk proteins are still finding support. Will demand stay strong as new products come online, or will the economy finally put a lid on protein? In episode 105 of The Milk Check, host Ted Jacoby III and the T.C. Jacoby & Co. team focus on two of the busiest corners of the dairy market right now: nonfat and protein. In this episode, we cover: Why low inventories could keep powder markets volatileHow exports, Mexico and production interruptions contributed to the moveHow the price gap between whey and milk proteins is encouraging reformulationWhat consumer spending, GLP-1 use and alternative proteins, and the economy could mean for dairy protein demand But this is still a market with plenty of unanswered questions. Listen as the team at T.C. Jacoby & Co. shares their view and outlook on what’s coming and why. Listen to The Milk Check episode 105: Powder pops. WPC 80 slips. Dairy proteins defy gravity. Also available on: Amazon Music, Apple Podcasts, Spotify, and YouTube. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Transcript: Ted Jacoby III: [00:00:00] Coming up on the Milk Check. Diego Carvallo: We’ve had a 28 or 30 cent nonfat rally in a matter of about 15 days that caught a lot of people by surprise. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Ted Jacoby III: We are going to have a very focused market discussion. We’re recording this on August 24th, and the reality is, so far in the milk side of the business, things have been relatively underwhelming. We’re expecting milk to tighten up. It has, but only in a very normal way, so nothing huge to talk about. Cheese has been a non-event. The cheese market is very quiet right now. We’re expecting it to stay quiet. But there’s been a lot going on in nonfat and a lot going on in protein. So we’re gonna focus on nonfat and protein today. Diego, let’s go ahead and get started on nonfat. What’s been going on in the nonfat market, and what do you think is gonna happen next? Diego Carvallo: It’s been a very interesting market, Ted. We’ve had a 28 or 30 cent nonfat rally in a matter of about 15 days that caught a lot of people by surprise. We went from about $1.45 per pound to $1.75. And now we’re slightly below that. We’re close to the 1.70, but the CME spot market has remained at a premium. I think what led to this rally were a couple of things. One is when we got to 1.45, we became very competitive for skim milk powder. And we know for a fact that a few of the large producers in the U.S. made very interesting sales for exports after having exported very little for this year so far. That helped manufacturers and the whole market, find some sort of psychological support to prices. And then, at the same time, we noticed how several of the manufacturers were in a relatively good spot when it comes to sales for August and September. They were not having burdensom inventories, and they were pretty proud with their offers. So I think the whole market realized that Mexico still had a few shorts that they needed to cover. We made some international exports after not exporting for a while, so I think the whole market found some support and it rallied quite a bit. I was also surprised to see that rally. I think we got to the $1.75 and we started seeing pushback from Mexico. We started not being competitive in international markets again. And I wouldn’t be surprised if we see a correction in the coming days. At the same time, there are some rumors and also facts of production interruptions by some manufacturers. That also got people nervous, and I think that also contributed to the market rally. Ted Jacoby III: What do you mean by production interruptions? Diego Carvallo: There’s news that have gone around about some plants having recalls and some also production issues that have delayed [00:03:00] their releases. That added to a market that was nervous already. Ted Jacoby III: So, basically, a supply chain that has been relatively low on inventory to begin with, any kind of potential supply disruption such as another FDA recall or something that at least holds that product for a little while, the market’s just pretty sensitive to that, and that’s causing this extra volatility. Diego Carvallo: Exactly. Yep. Ted Jacoby III: Jake, what has this volatility been doing to the hedgability of our nonfat market? Jacob Menge: We’ve seen pretty poor CME NDPSR correlation compared to history. I don’t know if poor correlation is the word, but if you’re in short-term hedges you have a coin flip here of how well that hedge is gonna work for you. But in general the...

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